KB Homes Pulls A Fast One
The home builder KB Homes put out quarterly financials this morning, and as usual inventory is up. Opps! If you check the balance sheet, their "inventory" migrated to "property plant and equipment", leaving the current assets at less than half of current liabilities.
It has always been dubious that a company could consider work-in-progress housing as a current asset, but that's their call. Does it mean a shift in how quickly the firm expects to sell the houses?
When something similar happened at Centex a while back, investor relations blamed it on Yahoo. We'll see. Oh, and the line item increased over $500 million in the last quarter.
5 Comments:
That reclass from Inventories to P,P&E is Yahoo's fault as I just looked up KB's 10-Q and the amount is properly stated as Inventroies on its 10-Q filing with the sEC.
http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/04/15/MNG29C9D8D1.DTL
And the sensational news continues... I just realized today why we are in a bubble: I found myself thining that maybe I should actually partake in this frenzy! That did not last long of course, but made me realize that a bubble bursts when the last person stops believing in it :)
Another thing you have to watch is that the builders don't include the appreciation of their inventory as an income component.
For example, if they are holding $100M in inventory and the quarterly appreciation is 5%, they might add $5M to the income of the company.
Steel companies have been doing this lately. It improves their assets and their income artificially when prices are rising. When prices fall, it will work doubly negative.
that sfgate report cites a guy making less than 100000, buying second home for 60000+ . his first home appreciated by 95K and he is enthused to get a second one.
no doubt it is a frenzy!
Madhu
Working for the local government here in Las Vegas directly in development I have seen an unprecedented amount of new subdivisions come through in the past 2-3 weeks. I can't fathom who these buyers are and where they all come from(California?....for how long?) but when I hear of waitresses and bartenders getting in on $200000+ mortgages it makes me think twice about buying right now. I make around 60000 and as earlier posts have said get a real feeling of being looked down upon even though my job in gov will be much more stable in the coming years. I'm waiting this one out and not going to take the sucker punch....
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